[May 16, 2014]FRANKFURT (Reuters)
— Banks will
return 6.155 billion euros ($8.44 billion) in long-term
crisis loans to the European Central Bank next week,
more than this week and than was expected as banks trim
down their reliance on ECB funding and return to the
markets.

The amount banks will repay on May 21 is more
than this week's repayments of 3.365 billion euros, and above
the 3.5 billion forecast in a Reuters poll.

Banks are voluntarily offloading the crisis loans they took from
the ECB in late 2011 and early 2012 in anticipation of
Europe-wide bank stress tests, which will over the next couple
of months check how the lenders hold up under certain scenarios.

The tests are part of a broader balance sheet review done by ECB
before it takes over as bank supervisor in November.

The repayments have reduced the amount of spare cash in the
system to levels that have started to put upward pressure on
overnight bank-to-bank lending rates. EONIA has shot above the
ECB's main rate of 0.25 percent several times now, but stood at
0.172 percent on Thursday.

Excess liquidity, which is the measure of money that banks have
beyond what they need for their day-to-day operations, stood at
113 billion euros on Friday, recovering from 74 billion euros
last week as banks adjust their funding.

ECB President Mario Draghi pointed out last week that recent
volatility in short-term money market rates had not spilled over
into the medium-term and that more liquidity in the EONIA market
was to some extent a positive sign as banks were going back to
the market and fragmentation was receding.

"In other words, banks rely less on the ECB and more on each
other," Draghi said in the post policy meeting news conference.

On Friday, the ECB said three banks would repay 5.005 billion
euros from the first LTRO on May 21, and two banks would pay
back 1.15 billion from the second LTRO.